Couple days ago, I joined an webinar about short sell property in US. Here is the link.
http://www.mentorfinancialgroup.com/mfg/events/webinarreplays.php
Because of the sub prime crisis, there are many property there under the pressure of foreclosure. This give investor the opportunities to use this creative strategy.
The idea of this investing strategy is
1. Locate an property whose owner is behind mortgage payment
2. Negotiate to take over the property with the owner with no money down or little money.
3. Go to the lender to negotiate the outstanding loan balance down to approx 80% of the market value of the property.
4. Take over the property and on sell it with underlying mortgage.
Has any one heard any one using this strategy in Australia? Or done any any deal with this strategy?
You will not do it here it Australia but works well in the land of the Big Mac.
Richard Taylor | Australia's leading private lender
Hi Hengjin
I'd have to agree with Richard, in that the exact model you mentioned is not done in Australia.
Having said that, we have taken control of quite a number of porperties that were close to foreclosure. Some we've kept as buy & holds and some we've on sold with Vendor (Seller) Finance. Thanks.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
I understand that "assuming" mortgages is possible in Australia, but not easy, as I have been told you need about 6 documents to do it.
I'd love to find out how though! It's apparently part of the GoDirect syllabus.
Beware of short selling – anything.
The idea is that you "borrow" someone elses asset to sell it now at todays price and then buy it at a cheaper price in the future – an arse about way of speculating on prices going down rather than up.
If you are into punting and don't mind getting stuck with a lemon – refer share short selling like happened with ABC Childcare etc.
This is speculating, not investing therefore the stakes are high.
Wealth Accumulator wrote:Beware of short selling – anything.The idea is that you "borrow" someone elses asset to sell it now at todays price and then buy it at a cheaper price in the future – an arse about way of speculating on prices going down rather than up.
Hi, Wealth Accumulator. Thanks for your advice.
However, I think I might have misled your understanding. The idea of short sell in property is not "Borrow" the property from someone else to sell it and "buy it at a cheaper price".
Instead, to negotiate with the current lender to discount the existing mortgage (reduce the debt) before an investor to buy this property. Of course, the price to buy this property from the vendor must be equal or greater than the reduced debt balance.
In this way, the vendor who defaults repayment can now walk away from the property without leaving a bad record in his/her credit file or declaring bankruptcy. At the same time, he/she pockets some money(the difference between the sale price and the debt balance). The investor then picks up the property as a bargain.
I think it is a win-win solution. I am wondering who is using this strategy in Australia.
Haven't heard of it here but it seems like the old "vulture fund" approach where people with the money look for companies that have a good product but have been run poorly and swoop in when they are in difficulty and buy them out – smarten up management and list the company for investors to buy them out.
The difficulty with the property arrangement would be (without leaked private information) finding the distressed property owners who are willing to own up to it.
It seems like an interesting strategy.
Wealth Accumulator wrote:The difficulty with the property arrangement would be (without leaked private information) finding the distressed property owners who are willing to own up to it.
This is a classic scenario to look for motivated seller. It is no different than many investing strategies do. It is common in real estate investing. The trick is what you do with the motivated seller – how you negotiate between the seller and the lender.
Wealth Accumulator wrote:it seems like the old "vulture fund" approach where people with the money look for companies that have a good product but have been run poorly and swoop in when they are in difficulty and buy them out – smarten up management and list the company for investors to buy them out.There is no such a process to smarten the management in this strategy. The key is to reduce the debt.
Not even you, Short Sell property is also some thing new to me. But I don't feel surprise about it. It just makes business sense to me. Going thru the mortgagee repossession takes a long time for the lender. During this period, the lender is losing money for the legal fees, repayment, commission etc, etc. And a lot of trouble to deal with.
Recently, I finished a course from TAFE for real estate agents. One of my teacher works closely with the banks as a valuer. He told me, the banks are actually happy to see such an offer so that they will get rid of the bad debt and stop losing money on the property.
Short Selling is a popular formula in the US especially at the moment where from what i have seen the lenders are taking as little as 15 cents in the dollar.
I assure you that Australian Banks are legally obliged to offer the property for sale and will not take private offers by negotiations with external parties without either taking the property to Auction, tender or merely for sale.Richard Taylor | Australia's leading private lender
Taking over the mortgage in the U.S, is that similar to their tax Liens?
Manthengjin.li wrote:3. Go to the lender to negotiate the outstanding loan balance down to approx 80% of the market value of the property.
in our area this is usually the strategy of some realtors to sell property especially with times like this
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